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28 Taxing challenges | Section IV Section IV: Taxing challenges In supply chains that span multiple countries, different corporate and indirect taxes and customs duties can complicate the lives of procurement professionals: many recognize the problem, but fewer have been able to address it successfully. To an extent, taxrelated difficulties, and options for dealing with them, are industry, or even company specific. Paul Snow, Vice President, Procurement, High Liner Foods, for example, explains that High Liner is “guided very little by duties or taxes: we are confined by where the product can be found and a lot of the materials are not subject to duty.” Similarly, Stephen Biesenbach, Chief Procurement Officer, Vattenfall, notes that “to be honest, we don’t feel that this is really an issue for us.” With large and strategic suppliers, Vattenfall can usually arrange for delivery to its national businesses by a supplier subsidiary in the same jurisdiction. Views on international procurement operations In structuring our procurement operations, we consider both direct and indirect taxes 18% 37% 20% 7% 3% 15% Customs duties and compliance is a major 16% 34% 22% 11% 3% 14% issue and we actively manage it to reduce the costs of compliance Transfer pricing related to internal transfers of goods and services between related parties arising from procurement activities is a significant issue for us 14% 31% 24% 12% 4% 15% Our overall tax burden has been reduced by 9% 23% 27% 15% 5% 21% structuring international procurement operations in a tax-efficient manner 0 10 20 30 40 50 60 70 80 90 100 % of respondents Agree strongly Agree Neutral Disagree Disagree strongly Don’t know/ Not applicable © 2008 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm visàvis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Taxing challenges | Section IV 29 Key findings: • Although tax concerns vary by company, half of respondents see customs duties as a major issue for procurement. • Tax barriers are a serious consideration when planning procurement strategy. • However, only one in three respondents has been successful in reducing the tax burden on <strong>purchasing</strong>. Such companies, however, are in the minority. In our survey, half agree that customs duties and compliance are major issues which they actively manage, against 14 percent which do not. Even more (55 percent) structure their procurement operations to take account of direct and indirect taxes, and 45 percent find that tax issues complicate internal company transfer pricing. One Asiabased executive interviewed noted that, “Tax is the biggest barrier for the free movement of goods. A duty of 10 percent kills regional sourcing.” It is therefore surprising that in the survey only a third of respondents report success in reducing their overall tax burden by structuring their international procurement activities in a taxefficient manner. Moreover, just 9 percent say that they have implemented taxefficient procurement structures, although a further 18 percent are currently doing so and 26 percent are considering them. A broader, executivelevel understanding of taxrelated opportunities associated with procurement would likely stimulate more interest in these types of initiatives. Simply comparing how many respondents consider this a major issue and how few have had success in the area shows that a notable number of companies have room to improve here. The gains can be dramatic. Connelly estimates that roughly “30 percent of the benefit of going offshore is in tax/currency considerations. It is hugely important to us.” He also recalls that a previous company for which he worked saved $40 million a year simply by procurement structuring its purchases in a taxefficient manner. Byrne adds another advantage of focusing here: “in many ways, it is the easiest thing to do because it is a relatively painless win. It does not hurt your suppliers.” © 2008 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm visàvis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Page 1 and 2: A DVISORY Beyond purchasing Next st
Page 3 and 4: Contents About the research 2 Forew
Page 5 and 6: About the research 3 To supplement
Page 7 and 8: | | Foreword 5 Beyond these specifi
Page 9 and 10: Executive summary 7 Taxation often
Page 11 and 12: A strategic role? | Section I 9 Key
Page 13 and 14: A strategic role? | Section I 11 Vi
Page 15 and 16: © 2008 KPMG International. KPMG In
Page 17 and 18: KPMG comment | Section I 15 KPMG co
Page 19 and 20: Procurement functions and purchasin
Page 23 and 24: KPMG comment | Section II 21 KPMG c
Page 25 and 26: Information technology | Section II
Page 29: KPMG comment | Section III 27 KPMG
Page 33 and 34: KPMG commentt || Sect ctioion IIV 3
Page 35 and 36: It’s not easy being green | Secti
Page 39 and 40: KPMG comment | Section V 37 KPMG co
Page 41 and 42: Global differences | Section VI 39
Page 45 and 46: Conclusion 43 Conclusion The procur
Page 47 and 48: KPMG final thoughts | Conclusion 45
Page 49 and 50: | Appendix 47 2. Which best describ
Page 51 and 52: | Appendix 49 5b. Who do you think
Page 53 and 54: | Appendix 51 9. What percentage of
Page 55 and 56: | Appendix 53 13. What are the most
Page 57 and 58: | Appendix 55 17a. How much has the
Page 59 and 60: Appendix 57 21. In which country is
Page 61 and 62: | Appendix 59 24. What are your org
Page 63 and 64: Thanks to everyone who participated

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